Even as RIM has soared in international markets, the commoditization of devices has weighed on wholesale prices of BlackBerrys, which have fallen to about $229 in August of this year from about $370 in 2009.
Jefferies & Co. analyst Peter Misek says getting good margins in markets such as Nigeria requires a lot of effort. “If they execute, engineer and scale, they can have reasonable margins,” he says. “Will they have good margins? That depends. ... You have to be really, really smart. You have to have crisp execution. And you have to have amazing management.”
At RIM, according to one former executive familiar with management’s thinking, there is now cold realism about these markets’ potential, as opposed to two or three years ago. RIM was displacing Nokia as the aspirational brand of choice in many countries, but RIM’s top executives are well aware of the risks.
“They were bombing Nokia in those markets, but you go from being the bomber to being the bombed – and things move quite fast now,” the executive said. “It’s the way of the beast. It’s consumer electronics. ... Do they perceive that this can last forever? No. They know they have to refresh it.”
That’s why RIM’s slick new BlackBerry 10 phones, meant to come out early next year after numerous delays, are so important, even in emerging markets: They must keep the momentum going.
RIM’s Mr. Wepener maintains that, given Nigeria’s demographics, “if you can hang on to market share, you’ll grow anyway” because the largely untapped market is getting bigger, richer and shifting to higher-value smartphones all at the same time – a rising tide lifts all boats argument. But that was also RIM’s thinking when the iPhone first hit the scene in North America. Even though smartphone growth was exploding, RIM’s share of that growth crumbled.
For the near term, RIM’s growth is all but assured: For trend-conscious Nigerians like Ms. Anukam, the student ambassador, it is simply incomprehensible to think of using another smartphone. But she, and the Nigerian market more broadly, will eventually mature. And maturing markets dropped RIM in the past.
“I don’t see why somebody would say BlackBerry is not cool,” Ms. Anukam says. “Anyway, I haven’t used any other phone. I’ve been stuck with this for, like, four or five years.”
INVESTING DESPITE THE RISK
Inder Bajaj knows a bit about emerging-market risk.
The telecom industry veteran worked at two of the largest wireless companies in India – hardly the easiest market in the world – before coming to Lagos, where he heads up Helios Towers, a company that manages more than a thousand communications towers across Nigeria.
First, there’s Nigeria’s constant power outages. Like most buildings in Lagos, Mr. Bajaj’s office runs mainly on diesel generators. And his towers are no exceptions: Even cell towers in the most remote locations need to have a constant supply of diesel in order to function; that means trucks, bumping along pot-holed, flooded roads. If he can manage to keep theft of his diesel to about 10 per cent, he says, he’s doing a good job.
Then there’s Boko Haram: The extremist Islamist group in Nigeria’s arid, mainly Muslim north has been setting off car bombs and blowing up churches – and recently started targeting cell towers. “In the last month, we’ve had attacks on three of our towers,” Mr. Bajaj said in late September. “We have (diesel) tanks with three to four thousand litres at the site, so if you use fire, it’s easy.”
Of course, the risk here is part of the huge potential to be found in Nigeria’s massive population of about 170 million people. Wireless industry executives like Mr. Bajaj have piled into Nigeria as the industry has taken off.
Rick Rogers, a telecom executive with a decade of experience here, says Nigeria is at a point where the government needs to privatize operations or plunge more investment into decaying infrastructure and poorly delivered services if the country wants to modernize further. (Of course, privatization in a country with as much corruption as Nigeria is not always a quick and easy solution.) “There’s a lot of structural problems here to get over – sustainable government investment would be a good start. ... Investment in health. Education should be a priority.” They should privatize power distribution, road infrastructure, airports, ports.” To enable investment, you need infrastructure.” If the public sector’s not investing, how do you move forward?”Report Typo/Error
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